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BANNER CORP (BANR)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered sequential and year-over-year improvement: revenue $160.6M (+4.5% q/q; +5.3% y/y), diluted EPS $1.34 (+$0.04 q/q; +$0.10 y/y), and tax-equivalent NIM expanded 10 bps q/q to 3.82% .
  • Profitability was aided by lower funding costs (total cost of funding down 13 bps q/q to 1.60%; deposit cost down 8 bps to 1.53%) and maturity of a balance sheet hedge that lifted margin by ~4 bps; loan yields dipped modestly with Fed cuts .
  • Credit remained solid: ACL at 1.37% of loans with 421% NPL coverage; NPAs fell to 0.24% of assets q/q, though substandard loans rose to $192.5M reflecting broader macro softness .
  • 2025 setup: management guides Q1 NIM “relatively flat,” 2025 expenses up from Q4 run-rate (inflation, origination system rollout), and loan growth targeted mid-single digits; quarterly dividend maintained at $0.48 .

What Went Well and What Went Wrong

What Went Well

  • Margin expansion and revenue growth: NIM rose to 3.82% (+10 bps q/q) as funding costs declined; adjusted revenue rose to $160.1M (+$6.4M q/q) .
  • Deposit cost discipline and core funding resilience: deposit costs fell 8 bps q/q to 1.53%; core deposits stayed 89% of total with deposits at $13.51B .
  • Management highlighted strategic execution: “continued successful execution of our super community bank strategy… strong core deposit base… resilient and loyal” (CEO) .

What Went Wrong

  • Expense pressure: non-interest expense rose to $99.5M (+$3.2M q/q) driven by higher professional/legal (+$0.9M) and marketing (+$0.6M); efficiency ratio still elevated at 61.95% .
  • Provision uptick and substandard loans: provision increased to $3.0M (vs. $1.7M in Q3) and substandard loans climbed to $192.5M; net charge-offs rose to $2.3M .
  • Loan yields edged down with Fed cuts: average loan yield decreased 2 bps q/q to 6.02%, partially offset by hedge benefit and new production at 7.56% (CFO) .

Financial Results

Core P&L and Margin Metrics

MetricQ2 2024 (oldest)Q3 2024Q4 2024 (newest)
Total Revenue ($M)$149.7 $153.7 $160.6
Adjusted Revenue ($M)$150.5 $153.7 $160.1
Net Interest Income ($M)$132.5 $135.7 $140.5
Diluted EPS ($)$1.15 $1.30 $1.34
NIM (tax-equivalent, %)3.70% 3.72% 3.82%
ROAA (%)1.02% 1.13% 1.15%
Efficiency Ratio (%)65.53% 62.63% 61.95%

YoY Comparisons (Q4 2024 vs. Q4 2023)

MetricQ4 2023Q4 2024
Total Revenue ($M)$152.5 $160.6
Diluted EPS ($)$1.24 $1.34
NIM (tax-equivalent, %)3.83% 3.82%
Deposit Cost (%)1.18% 1.53%

Balance Sheet & Funding KPIs

KPIQ2 2024 (oldest)Q3 2024Q4 2024 (newest)
Total Deposits ($B)$13.08 $13.54 $13.51
Core Deposits (% of total)88% 89% 89%
Net Loans ($B)$10.99 $11.07 $11.20
Loan Yield (%)5.96% 6.04% 6.02%
Deposit Cost (%)1.50% 1.61% 1.53%
Total Funding Cost (%)1.66% 1.73% 1.60%
NPA / Assets (%)0.21% 0.28% 0.24%
ACL / Loans (%)1.37% 1.38% 1.37%
ACL / NPL (%)498% 359% 421%
Net Charge-offs ($M)$0.245 $0.230 $2.283

Segment Breakdown – Loans ($M)

CategoryQ2 2024 (oldest)Q3 2024Q4 2024 (newest)
CRE – Owner-occupied$950.9 $990.5 $1,027.4
CRE – Investment Properties$1,536.1 $1,583.9 $1,623.7
CRE – Small Balance$1,234.3 $1,218.8 $1,213.8
Multifamily Real Estate$717.1 $889.9 $894.4
Commercial Business$1,298.1 $1,281.6 $1,318.3
Small Business Scored$1,074.5 $1,087.7 $1,104.1
One- to Four-family Residential$1,603.3 $1,575.2 $1,591.3

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest MarginQ1 2025Q4 2024 view: moderate compression expected post-Sep Fed cut “Relatively flat” in Q1; flat-to-down following rate cuts; up a few bps per quarter absent further cuts (CFO) Clarified trajectory; flat near-term; modest upside if no further cuts
Deposit CostsQ1 2025Expect reductions to lag asset repricing (Q3 commentary) Some decline expected in Q1; competitor beta reductions may temper magnitude (Mgmt) Maintained cautious stance; incremental improvement
Wholesale BorrowingQ1 2025Q3 used growth in core deposits to reduce FHLB Q4 unusually low; expect some increase in Q1 wholesale borrowing (CFO) Anticipated increase
Loan GrowthFY 2025Low-to-mid single-digit for 2024; mid-single-digit outlook into 2025 (Q3) Targeting mid-single-digit growth for 2025; pipelines healthy; watch macro risks (CCO) Maintained
Expense GrowthFY 2025Low single-digit trend historically (Q3) Start from Q4 run-rate; expect increases in 2025 (inflation, wage, origination system rollout before efficiencies) (CFO) Raised near-term expense outlook
Technology InvestmentFY 2025Investments ongoing (Q3) New loan/deposit origination system to go live in Q2; initial expense add, then efficiency gains (CFO) Execution timeline provided
DividendQ1 2025$0.48/qtr (Q3) Declared $0.48 payable Feb 14, 2025 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q4 2024)Trend
Margin trajectoryQ2: NIM 3.70%, funding cost up; Q3: NIM 3.72%, expected compression post-cut NIM 3.82%, aided by funding cost decline and hedge; Q1 2025 “flat” outlook Improving in Q4; cautious near-term
Deposit beta/competitionQ3: reductions planned; monitoring competitor behavior Deposit cost down 8 bps; clients receptive; account counts up despite rate cuts Favorable cost trend; stable base
Loan growth/pipelinesQ3: low-to-mid single-digit; pipelines rebuilding Mid-single-digit 2025 target; C&I growth across WA/CA; utilization up 1% Healthy pipelines; balanced by macro risks
Credit qualityQ2/Q3: reserves strong; some ag and consumer pressures ACL 1.37% of loans; NPA 0.24% of assets; substandard loans up; ag sensitivities persist Stable loss coverage; watch list growing
Mortgage bankingQ2/Q3: low volumes; revenue improved on pricing; strategy core to franchise Revenue $3.7M; pooled sale gain; management sees opportunity as peers exit Opportunistic expansion
M&A / footprintQ3: active dialogue; scale matters Market remains competitive; focus within current footprint; add teams where appropriate Disciplined; selective
Technology investmentQ3: strategic investments continue Origination system to go live Q2 2025; near-term expense then efficiencies Execution phase

Management Commentary

  • CEO framing: “Banner’s fourth quarter financial performance reflects the continued successful execution of our super community bank strategy… strong core deposit base… resilient… with core deposits representing 89% of total deposits at quarter end.”
  • Margin drivers (CFO): “Net interest margin increasing 10 basis points to 3.82%… driven by the 13 basis point decrease in funding costs… and [a] balance sheet hedge… which added 4 basis points to margin.”
  • NIM outlook (CFO): “Given the rate cut… expect NIM to be relatively flat in Q1… flat to down following a rate cut… up a few basis points each quarter [absent cuts].”
  • Credit stance (CCO): “Credit metrics remain solid… provision… the result of the increase in adversely classified loans as well as moderate loan growth… coverage of 1.37% of total loans.”
  • Mortgage banking (CEO): “We continue to see great opportunity… as more people exit… we have a core competency [to] take advantage of… market disruption.”

Q&A Highlights

  • Margin components and sustainability: Funding costs dropped 13 bps; average FHLB advances “essentially 0”; hedge maturity added ~4 bps; December margin was a few bps above the quarterly .
  • 2025 NIM sensitivity: Expect flat in Q1; flat-to-down in quarters following cuts; up a few bps per quarter without cuts .
  • Expense outlook: Use Q4 as run-rate baseline; 2025 expenses to rise with inflation and origination system rollout before efficiencies .
  • Loan growth: Target mid-single-digit in 2025; C&I opportunities across WA/CA; utilization up; balanced against macro risks (rates, immigration reform, tariffs) .
  • Deposits: Exception-priced clients receptive to rate reductions; competitive rates maintained; account counts increased with stable average balances .

Estimates Context

  • Wall Street consensus EPS and revenue estimates from S&P Global were unavailable due to data access limits; as a result, formal beat/miss determinations versus consensus cannot be provided. Analysts may revisit 2025 NIM and expense trajectories given management’s guidance for flat Q1 NIM and higher operating costs tied to the origination system rollout .
  • Values retrieved from S&P Global (consensus estimates) were not available due to request limits.

Key Takeaways for Investors

  • Funding-cost relief and hedge tailwinds drove a clean NIM inflection in Q4; near-term NIM guide is “flat,” with upside in a no-cut scenario—watch deposit betas and wholesale mix .
  • Core deposits remain a strategic advantage (89% of total); stable base supported margin resilience and liquidity posture .
  • Expense trajectory will step up in 2025 from Q4’s run-rate (inflation, system rollout) before efficiencies arrive—model higher non-interest expense early next year .
  • Credit remains manageable (ACL 1.37% of loans; 421% NPL coverage), but rising substandard balances warrant closer monitoring, especially ag and small business exposures .
  • Loan growth outlook mid-single digits for 2025; pipelines healthy in WA/CA; new production yields remain above portfolio yields (7.56% in Q4) .
  • Mortgage banking is a differentiated capability; management sees share opportunities as peers exit—expect continued contribution with periodic pooled sales .
  • Dividend supported by robust capital (CET1 12.44%; leverage 11.05%); continued payout at $0.48 signals confidence in core earnings power .